This Morning: Adobe Rising, Apple Cut, RIMM Pondered

By Tiernan Ray

Here are some things going on this morning in your world of tech:

Shares of Adobe (ADBE) are up $1.72, or almost 5%, at $37.25, after the company last night beat analysts’ estimates slightly for its fiscal Q4 but projected the current quarter and year below expectations as it transitions its business to a subscription format. That’s supposed to produce a better quality of earnings and revenue, over time. The stock got one upgrade, that I can see, to Outperform, from JMP Securities‘s Pat Walravens, and one downgrade, to Neutral, from Janney Capital. There were also several price target increases.

As Citigroup’s Walter Pritchard explained it this morning, as he raised his price target on the shares to $42 from $38, “There has been controversy around the impact of a transition to subscription. The debate will now turn from the subscription transition to “what do you pay for it”. We are raising our DCF-based target to $42 based on higher out-year numbers, but we believe a “mid-teens” multiple is where it will settle out, which is in the range of our target on normalized FY13E EPS (~$2.60).”

Shares of Best Buy (BBY) are down $2.04, or almost 15%, at $12.07, after the company this morning said it extended until February 28th an agreement reached in August allowing founder Richard Schulze to complete a due diligence evaluation for a possible takeover of the company. The stock surged yesterday on speculation that a deal might be announced today.

Shares of Apple (AAPL) are down $16.94, over 3%, at $512.75, after UBS’s Steve Milunovich this morning reiterated a Buy rating but cut his price target to $700 from $780, after cutting his estimates for this fiscal year and next to reflect what he thinks are lower “build rates” for the iPhone, and some sources have told him that the iPhone 5 is not doing as well in China as the prior model, the iPhone 4S. He also thinks the new iPad mini is cannibalizing sales of the full-size model. Milunovich now models $187.2 billion in revenue and $47 in EPS this year, which is below the average $192 billion and $49.63 on the Street.

Speaking of Apple, Needham & Co.’s Charlie Wolf, who has a Buy rating on Apple shares and a $750 price target, today reflects on the arrival late Wednesday of the Google (GOOG) maps application on the iPhone, in the wake of Apple’s much-maligned mapping application. Wolf sees the Google app as a “mixed blessing”: “On the one hand, it should go a long way toward dampening the negative perception that the Apple Maps app engendered when iOS6 launched in September […] At the same time, however, it could slow Apple’s efforts to create a competitive maps app on its own. That’s because users’ input is critical in improving the quality of the application, and Apple will now receive less feedback on its own Maps app what with iPhone owners flocking to Google Maps.”

The weakness in Apple, in fact, has prompted some declines in stocks of companies serving Apple, including Jabil Circuit (JBL), down $1.12, or 6%, at $17.41, and Qualcomm (QCOM), off $2.98, or 5%, at $59.78.

Shares of Research in Motion (RIMM) are up 5 cents, or at $13.91 amidst a flurry of notes on the company this morning.

The company is set to report fiscal Q3 results next Thursday, and Anil Doradla with William Blair reiterates a Market Perform rating, writing that estimates may be too high for the quarter: “We estimate a fiscal third‐quarter loss of $0.48 per share, $0.13 below consensus. Our revenue estimate of $2.5 billion implies a 12% sequential decline and a 52% year‐over‐year decline.”

Meantime, Bernstein Research’s Pierre Ferragu raised his price target to $12, while reiterating a Market Perform rating on the shares, writing that the Street is being too pessimistic about the company’s fiscal Q4 that ends in February, a quarter in which sales of the company’s new “BB10″ software, and accompanying handsets, should be getting underway.

At the seme time, Raymond James’s Tavis McCourt reiterated a Market Perform rating on RIMM, writing that “showing just a modicum of success might be enough to pique the interest of other players to partner or look more strategically at RIM in a world short on smartphone OS, in our opinion.”

And in case you missed it, The Wall Street Journal’s Will Connorsthis morning has a profile of the group of user interface designers known as the The Astonishing Tribe, whom RIM brought into the fold in 2010 to help make the look and feel of BB10. According to Connors’s piece, everything will be riding on the work they’ve done when BB10 comes out next year.

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There are 2 comments

DECEMBER 14, 2012 11:29 A.M.

Rottan Frewt wrote:

I can't wait to hear the Apple bulls throw more bull. Another buying opportunity? The slingshot is getting pulled back further? The Mayan calendar date is getting closer? What BS are they going to claim about Apple's share price stinking up the place now. These are the facts:

Apple's share price is falling faster than its market share. When are the bulls going to understand that Apple is a lousy investment? Even stinky RIM is performing better for shareholders than crappy Apple is. Apple's P/E is sitting solidly in the 11s which clearly indicates Wall Street thinks less of it than any number of stale tech stocks. Analysts should never have upgraded the stock in the first place unless their intent was to deceive investors. They did that rather well. Now they have no choice but to downgrade the stock because it was never going up to begin with. Yeah, sell your home and buy Apple... and join the rest of the homeless fools who listened to faux analysts like Munster and Andy Zaky.

Android is killing Apple in Wall Street's eyes no matter how much money Apple is making for itself. Apple long-term investors are getting shafted hard and deep. Apple is going to break some record of having the most reserve cash for a company going out of business. Thanks, Tim Cook for running a perfectly good company into the ground in less than two years. Apple has been done in by an iOS copy. Steve Jobs is fortunate to be gone and not having to see Apple get destroyed by the OS he swore to destroy.

DECEMBER 14, 2012 12:34 P.M.

@ Rottan Frewt wrote:

I bet you anything that you can't make sense of your thesis while using actual numbers with dollar signs. Hmm. Anyway. Nice try. Who says an English Lit degree is useless.

Dude. You have Freddy the dead beat written all over you. Get an enema will you.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.